Global economic indicators are moving positively, with GDP growth above market expectations, manufacturing PMI at its highest level in almost two years and the OECD’s Composite Leading Indicator suggesting continued moderate global growth.
Situation summary
Carriers have been pushing spot rates increases, GRIs and surcharges on all Asia outbound lanes, due to increased demand and increasing equipment challenges in more origins and it would be prudent to expect more of the same.
Overall downward pressure on air freight spot rates are expected, except on trade lanes where the ongoing spike in eCommerce and lingering uncertainty around Red Sea disruption are expected to bolster rate levels.
OCEAN
Ocean freight rates from Asia have increased sharply as carriers impose a bundle of GRIs, with more possible.
Increases in demand, during what is normally a slow season, surprised many carriers and it is resulting in reports of rolled containers and full ships through the end of the month.
Global demand for ocean freight space is up 9% YoY and is expected to increase further in the coming months.
US imports from Asia have already surged over 19% YoY in 2024 and retailers are forecasting continued import growth into the traditional fall peak shipping season.
The tightening of vessel space availability from Asia has sent the Shanghai Containerized Freight Index (SCFI) to its highest level since September 2022, rising 19% after last week’s holiday, with sharp increases on all long-haul routes ahead of the summer peak season.
It is difficult to see what precipitated the steep increase in demand over the last couple of weeks, which have been remarkably strong.
It may be buyers pulling orders forward because they have concerns about global geopolitical uncertainties, or they need an additional two-week buffer of stock in transit. Or rates could be driven by a more general restocking to replenish inventories.
The speed and pace of change in the market has been phenomenal, replicating the lead-up to the peak of the pandemic. And with demand hugely high carriers are putting rates out and then withdrawing them because they have already been replaced with higher levels.
AIR
In April, year-on-year growth of the global air cargo spot rate turned positive for the first time since August 2022, rising 5% due to a combination of conflicts and strong eCommerce demand.
Growth in spot rates was largely driven by regional developments, market sentiment (which is currently jumpy) and the high first quarter volumes.
However, we expect rates to ease, as the increased interest in airfreight due to Red Sea shipping disruption will lessen as shippers factor in longer lead times and the revised conveyer belt of container ship arrivals becomes established.
The China to US market led in terms of freight rate growth in April, jumping 20% month on month, while average spot rates to Europe and the US and spot rates from the Middle East and Central Asia region all grew at 18% month on month.
Southeast Asia to Europe spot rates rose by 14% month on month in April, while the rate to the US increased slightly less at 12%.
Focus is now on securing capacity ahead of the fourth quarter peak season, in light of last year’s massive spike in eCommerce demand out of southern China and Hong Kong, and with the preparations already under way airlines are jockeying for negotiating positions after a ‘strong’ peak season last year.
ROAD
The Transporeon capacity Index monitors volume in the European road freight market and since November 2022, the Capacity Index has been above 100, indicating that capacity availability has not been a concern.
Capacity in April 2024 fell by -4.2% from March, falling just below 100, suggesting that European road freight capacity could be approaching potential supply chain bottlenecks as demand is picking up, with the Spot Price Index increasing 7% YoY.
Annual EU core inflation, which excludes energy and food products, fell marginally faster than the UK’s from -2.9% in March 2024 to 2.7% in April 2024.
From a supply-and-demand standpoint, this indicates a resurgence in consumption, which bodes well for the European economy, but also a more constrained road freight capacity situation.
The capacity tightening we’re seeing may be driven by inventory restocking after inventories were widely reduced in 2023 following the order rush of 2022.
Moving forward, lack of capacity coupled with an increase in consumer demand may further drive up spot and contract prices.
Our teams in the UK, Europe and across Asia continuously scan the evolving global multimodal operating environment, to identify potential issues and adapt operations, to avoid pitfalls that may challenge our customers’ supply chains.
We share the most important news and developments, so that you can make informed decisions that protect your supply chain.
To discuss any questions or concerns you might have, about the issues highlighted here, please EMAIL us for our immediate attention.
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